US Real Estate Conditions Year-End 2015

“Rents Will Rise Faster Than Home Prices In 2016, Consumers Say,” screams a headline from The Mortgage Reports Wednesday.

“According to Fannie Mae’s most recent National Housing Survey, US consumers expect that home prices will climb 2.3 per cent between now and next year; and that rents will rise by nearly double that amount.”

Each month, government-backed Fannie Mae polls 1,000 US households as part of its National Housing Survey. Consumers provide their observations on the economy and their outlook for US housing.

US Real Estate and Rentals

The U.S. home ownership rate peaked 10 years ago, said USA Today November 24. Since then it has dropped from over 69 per cent to under 64 per cent, where it was a half century ago, with each percentage point representing more than a million households.

An Urban Institute study this year predicted that in 15 years the home-owning rate will sink to 61 per cent. Baby Boomers — far more apt to own than members of succeeding generations — will move or die. And Millennials, now 18 to 34, will be slow to own, either because they can’t afford to or don’t want to.
Nationally, the number of single-family detached house rentals increased by 3.2 million between 2004 and 2013, according to Harvard’s Center for Housing Studies.

US Home Prices

The November National Housing Survey shows that consumers are bullish on the 2016 Housing Market.
Just 6 per cent of consumers expect home prices to drop between now and next year; and, if forced to move, two-thirds said they would purchase a home as opposed to renting one.

This is the highest reading in more than a year.

Home values will rise 2.3 per cent annually, consumers told Fannie Mae; and rents will rise 4.4 per cent, which shifts the Rent vs Buy equation.

Last year, for example, home values were forecast to rise by just over two percent annually. In reality, they rose by more than five per cent. As home prices rise, it becomes harder to save for a downpayment. Thankfully, buyers have a wide range of low- and no-downpayment loans from which to choose.

Home Ownership

Consider the Millennials. Although a MacArthur Foundation survey this year found that 88 per cent aspire to own a home, and 53 per cent say it’s a high personal priority, relatively few are following through.

Homeownership among households headed by those 30 to 34, which was above 50 per cent for decades, is at a record low 45 per cent. The first time homebuyer’s median age, once under 30, is now almost 33.

US Rental Rates

Real estate data firm Zillow said November 20 that median rents in- creased a seasonally adjusted 4.5 per cent from a year ago. This marks a steady deceleration from annual prices gains of 5.3 per cent in September and 6.2 per cent in August. Zillow recently updated its methodology for averaging rental prices, showing that past growth rates were higher than previously reported.

Housing costs have consistently exceeded income growth. Average hourly wages rose just 2.5 per cent over the past year to US$25.20, ac- cording to the Labor Department.

The median rental payment nationwide was US$1,382 in October. That works out to roughly 30 per- cent of the median US family income of US$53,657, a level that the government has historically identified as being financially burdensome.